Knowledge sharing
This article was written by John Lamb and published in the Innovations magazine #5.
Key points
- Attitudes towards technology transfer have changed markedly in the past 20 years.
- Companies that were once reluctant to consider transferring their tech now understand it is an important part of doing business.
- Many governments are including technology transfer in their regulations regarding foreign companies setting up shop.
Technology transfer has become a key ingredient for many organisations in their plans for growth, enabling them to open up new markets, forge relationships with business partners and extend their capacity to develop innovative products.
“The way we do business has changed and the way we negotiate contracts has changed,” explains Patrice Caine, chairman and CEO of Thales. In many cases, this involves a transfer of technology, something that can make some tech-driven companies nervous, but from Caine’s perspective it’s all part of the price of doing business.
“We welcome these changes – in today’s world, our clients are not looking for a simple seller-customer relationship, but a true partnership,” he says. “Transferring technologies is not a risk, as long as it’s done within the frame of international legislations, especially in the defence domain. If we want to be a major player
on the global market, we have not only to accept it, but also to embrace it.”
In the 1990s, technology-based companies guarded their intellectual property like a precious jewel, reluctant to let it out of their grasp; overseas partners mostly had to make do with outmoded technology.
But there has been a significant shift in the balance of power within international markets, which has resulted in a steady relaxation of their previously iron grip on intellectual property.
In many countries, technology transfer is now enshrined in law – or, at the very least, it has become a condition of doing business. Governments require companies that wish to trade in their countries to go into partnership with local firms as prime contractors or equal partners, transferring knowledge to these joint ventures and to local research laboratories.
Often, agreements involve both government agencies and commercial companies. For example, three years ago, Thales Alenia Space began partnering with Brazilian companies Embraer and Telebras to build a telecommunications satellite.
In many countries, technology transfer is now enshrined in law – or, at the very least, it has become a condition of doing business. Governments require companies that wish to trade in their countries to go into partnership with local firms as prime contractors or equal partners, transferring knowledge to these joint ventures and to local research laboratories.
Often, agreements involve both government agencies and commercial companies. For example, three years ago, Thales Alenia Space began partnering with Brazilian companies Embraer and Telebras to build a telecommunications satellite.
At the same time, Thales signed a memorandum of understanding with the Brazilian Space Agency that will see the company play a major role in shaping the country’s space programme. The deal involves sharing know-how in satellite telecommunications, observation and meteorology, as well as other areas.
“There are two reasons why you transfer technology. First, when you export to another country, the government may request a technology transfer,” confirms Marko Erman, chief technology officer and senior vice president for research and technology at Thales. “All countries want more local added value and hope to develop their economy by moving up the value chain. This condition is present in the vast majority of export arrangements.
“Second, we might want to transfer technology because the business case demands it. For example, it might be better to develop a product in China or India because the local competence is at the right level. It may be that a product developed for existing markets might be too sophisticated: local development
would get you a better result.”
Erman cites several companies that have decided to develop products that are “good enough” (ie in China) using a local, optimised supply chain, features and performance aligned with local constraints – low cost, ease of use, etc. But, ultimately, the product, while initially suitable for the local market, is attractive for other export markets.
“You often need to transfer technology to speed up development. It may be a condition of the deal, but it also means you can use a country as a source for new ideas,” Erman argues. And with a scarcity of skilled engineers in some parts of the world, countries with a ready supply of the right people, such as China and India, are very attractive. And while some argue that this risks cutting jobs back at home, in fact the opposite is true: when a business wins an important export contract, even one that includes a transfer of technology, it can help maintain and create new jobs in your home country.
would get you a better result.”
Erman cites several companies that have decided to develop products that are “good enough” (ie in China) using a local, optimised supply chain, features and performance aligned with local constraints – low cost, ease of use, etc. But, ultimately, the product, while initially suitable for the local market, is attractive for other export markets.
“You often need to transfer technology to speed up development. It may be a condition of the deal, but it also means you can use a country as a source for new ideas,” Erman argues. And with a scarcity of skilled engineers in some parts of the world, countries with a ready supply of the right people, such as China and India, are very attractive. And while some argue that this risks cutting jobs back at home, in fact the opposite is true: when a business wins an important export contract, even one that includes a transfer of technology, it can help maintain and create new jobs in your home country.
© ©Thales
Proceeding with caution
Some technologies are more sensitive than others. Defence sales always involve a state to state discussion before agreements between companies can be reached. Most sales require government approval before exports or technology transfer can take place.
“In the defence business, you need to have a clear assessment of the key assets that you don’t want to share with partners who may be potential competitors,” observes Martin Defour, chief technology officer of defence mission systems with Thales.
“Usually we limit the transfer of technology to development cooperation with laboratories and university departments to improve our relationships in particular countries. In India, for example, we have agreements with universities in Mumbai and New Delhi.”
Partnering with top universities is an important aspect of innovation for Thales, which has created joint projects with over 50 prestigious institutions and research laboratories worldwide. Indian universities, for example, are working with Thales on military radio frequency technology for predicting the physical properties of antennae.
There are many ways of limiting the potentially adverse effects of technology transfer.
There are many ways of limiting the potentially adverse effects of technology transfer.
“Protecting your know-how doesn’t mean that you can’t transfer technology,” says Erman. “You need to be clear about what makes your product different from the competition, what you would like to keep for yourself and what you are ready to share. You can decide that keeping a component – a specific material or a process – is enough to protect you".
For example, you can still transfer the quasi totality of the IP of a complex product, while keeping a tiny yet strategic asset that preserves your competitiveness.
“In such a way, you’re helping to build competencies in other countries, allowing them to extend their value chain, while you preserve enough differentiating elements to stay competitive on a global scale.”
The fast changing nature of technology development also provides protection against possible negative effects of technology transfer: “The world is open so we can transfer a technology knowing that we would urgently need to develop the next one in any case,” explains Erman.
He points out that, two decades ago, US and European telecommunications companies were making older generation products in China. Now China leads with more sophisticated products than their Western rivals.
“In such a way, you’re helping to build competencies in other countries, allowing them to extend their value chain, while you preserve enough differentiating elements to stay competitive on a global scale.”
The fast changing nature of technology development also provides protection against possible negative effects of technology transfer: “The world is open so we can transfer a technology knowing that we would urgently need to develop the next one in any case,” explains Erman.
He points out that, two decades ago, US and European telecommunications companies were making older generation products in China. Now China leads with more sophisticated products than their Western rivals.
“You can’t assume the rest of world won’t catch you up,” Erman says. “It is a rule of the game that, if you can’t accept technology transfers, you cannot export. Many people are afraid of using this model in China. Others believe that you have no choice. In non-defence, if you are not present, you are missing a major part of the market and at the end of the day you will lose out.”
© ©Thales
Solid foundations: TST
Jeremy Hooper, CEO of Thales Saic Transportation Systems (TST) from 2012 to 2015 – a joint-venture between Thales and Shanghai Electric Group – has been involved in the step-by-step transfer of communications-based train control (CBTC) technology from Thales Canada and France since 2007.
“Technology transfer may be driven by regulatory requirements, but it can also produce massive benefits in operational performance,” he says. “In the case of TST, the China market is sufficiently large with a significant opportunity pipeline to support investment in local capability. The aim for TST from the outset was to build a solid competence base in China that would serve the growing Chinese market. It would also bring real expertise close to the customer and largely remove dependence on the group’s international competence centres and therefore potential international priority conflicts.”
The transfer of technology of Thales and then TST (after its establishment in 2011) in China was carried out in a careful step-by-step approach from 2007 to 2013.
It began with local management, application design, procurement, installation and commissioning, then moved on to limited software development and in-house validation, before completing the transfer by covering the full project lifecycle. The latter included more fundamental activities of system design, vital and non-vital software development, safety assessment, etc. With this strong foundation, TST moved into more detailed research and development.
“One of the success factors of the technology transfer to TST has been the fact that the technology baseline transferred was mature and already delivered in previous China projects, under export mode,” says Hooper.
“Another factor was the availability of well-educated engineers in China, many of whom have very specific degrees in transportation or automation. This meant TST has been able to absorb the technology transfer and rapidly grow the size of the company in a short timeframe.
“Technology transfer is not just about transferring technology, especially in safety-critical systems. It is also about transferring a mature engineering management system, and a safety and quality culture. The SelTrac CBTC product line that forms the basis of the technology transfer has a 30-year zero-incident safety record, which is unique in the industry, but it would only take one incident to reset that clock to zero. Ensuring international levels of delivery and safety was the reason for the step-by-step transfer approach, and also the reason for our success to date.”
“Technology transfer is not just about transferring technology, especially in safety-critical systems. It is also about transferring a mature engineering management system, and a safety and quality culture. The SelTrac CBTC product line that forms the basis of the technology transfer has a 30-year zero-incident safety record, which is unique in the industry, but it would only take one incident to reset that clock to zero. Ensuring international levels of delivery and safety was the reason for the step-by-step transfer approach, and also the reason for our success to date.”
TST’s core business is providing CBTC technology for the China metro market but, based on the success of this approach, TST has taken the first steps to expand into tram control systems, with a first reference awarded in 2015 in Shanghai. This has triggered a new technology transfer programme from Thales Italy.
In brief
Attitudes towards technology transfer have changed markedly in the past 20 years.
Companies that were once reluctant to consider transferring their tech now understand it is an important part of doing business.
Many governments are including technology transfer in their regulations regarding foreign companies setting up shop.
